Leichtman Research Group, which has published well-regarded quarterly tallies of U.S. pay TV and broadband subscriber counts going back to the halcyon days of DSL in the early 2000s, is no longer offering its data to the public. 

The company’s First Quarter Research Notes, published back on March 26, will mark its last publicly distributed report.

“While LRG continues to track the industry and provide quarterly updates for our clients, I’ve decided to no longer publicly release the topline findings — I thought the year-end results were a good time to make the pivot,” company founder and principal analyst Bruce Leichtman told Next TV Thursday morning. 

We regularly abstracted LRG’s pay TV and broadband reports, sometimes getting too creative and driving past pro forma guardrails (apologies, Bruce).

We'll certainly miss LRG's quarterly data. 

And we missed the March 26 Research Notes report in which Leichtman — a New Englander, former distance runner and Kenny Loggins fan — discussed his company's pivot at length:

This is it 

In the early 2000s I discovered that running could actually be fun. While I was never gifted with speed, I enjoyed the motivation to improve, along with the feeling of being outside even on a cold New England day. As my distances expanded, I found my go-to song for the longer runs and races: This Is It by Kenny Loggins. 

A person’s pump-up song can tell you a lot about them, and even if we’ve never met, I’ve just thrown my cards on the table. This song falls in the genre that I frequently listened to when I was younger, unfortunately now known as Yacht Rock. Somehow, this nomenclature doesn’t make it seem as hip as it did back in the day, when This Is It made it into the top 20 on both the Adult Contemporary and R&B charts. 

Not wholly coincidentally, my running hobby began around the same time I started Leichtman Research Group (LRG), a name that unsurprisingly was not already taken. My goal with LRG was to build on my communications industry experience and knowledge by conducting related consumer research with more frequency than the annual studies that some larger firms were doing. 

In addition, a discussion/bar bet with an industry colleague (about whether there were more broadband subscribers via cable or DSL) helped lead me to a complementary research model. Over the past two decades, LRG has tracked the number of subscribers reported by the major broadband and pay TV providers, and publicly released the cumulative quarterly topline findings to help provide an ongoing industry scoreboard (and possibly resolve any bets). 

But the industry tracking has also helped to guide the consumer research. While surveys can provide a wealth of information on what consumers have, want and think about various products and services, reporting from providers offers data that can tell us where the market actually stands. Observing the alignment between these two sources of data offers an advantageous view of industry dynamics. 

It is this combination of consumer research and provider tracking that have been at the core of my business, and have been the basis of these Research Notes. The Notes are a compilation of the press releases from the latest consumer research studies and the provider tracking results for the quarter, along with a dedicated column with some additional observations (often including the copious use of numbers to help illustrate my points). 

About a decade ago, my knees told me that road running was no longer in the cards, but as a business evolves there’s no torn meniscus to tell you that it’s time to stop putting out press releases and newsletters. While LRG will continue to research and track the industry, which is as fascinating as it has ever been, this is the final version of the Research Notes.

As usual, below you will find highlights from a recent LRG consumer study, along the latest provider subscriber figures for year-end 2023. 

Thanks very much to all who have received and read these Notes, and those who have provided valuable feedback and assistance through the years.

The leading dozen U.S. pay TV companies, accounting for 93% of the domestic market, lost 1.74 million users in the third quarter, according to the latest quarterly research report from Leichtman Research Group (LRG). 

The loss represented a marked uptick over the 975,000 users shed in the third quarter of 2018, the 405,000 left behind in the third quarter of 2017, and the 250,000 lost in the Q3 2016.

These 12 pay TV companies now serve only 84.8 million subscribers, compared to 92.2 million just two years ago, according to LRG.

DirecTV, which lost 1.073 million users in the third quarter, combined for the lions share of blood loss. Comcast is once again seeing steady attrition (down 238,000 users in Q3), but the third quarter was really about AT&T and it’s pay TV customer growth problems. AT&T’s virtual platform, the recently rebranded AT&T TV Now, lost 195,000 users.

With U-verse’s 104,000 shed subscribers factored in, AT&T lost 1.37 million pay TV users in the third quarter.

“AT&T, the leading pay-TV provider in the U.S., accounted for 79% of the net losses in the quarter compared to 30% of net losses in 3Q 2018. This change is largely the result of AT&T’s strategic decision to increasingly focus on retaining and acquiring more profitable subscribers.” 

Of all the TVs in U.S. households, 32% are now connected smart TVs, according to the latest Leichtman Research report, “Connected and 4K TVs 2019.”

For companies like Amazon and Roku, that figure highlights the urgency of signing deals with Asian TV manufacturers and getting “pole position” on the smart TV user interface.

In 2017, smart TVs accounted for just 24% of all TVs in U.S. homes; the figure was only 7% in 2014, Leichtman said.

Making the proposition less compelling: At this point only 14% of U.S. adults are watching video daily on a smart TV.

Overall, 74% of U.S. households have at least one internet-connected TV device, such as a smart TV, or an OTT player such as Roku, Amazon Fire TV or Apple TV. This was up from 69% in 2017 and 50% in 2014.

According to the research company’s survey of 1,150 U.S TV homes, 31% of U.S. adults watch video on a connected TV daily. Among pay TV subscribers, that figure is only 25%. It’s 49% for cord cutters.

Other Leichtman findings:

> 49% of U.S. TV homes have at least one stand-along streaming device, up from 40% in 2017.

> 22% of U.S. TV homes with annual incomes north of $50,000 have a 4K TV vs. 9% of households with income under $50K.

> 34% of U.S. households that received a TV within the last year have $4K HDTV.

“About three-quarters of all TV households in the U.S. now have at least one connected TV device, with a mean of 3.9 devices per connected TV household,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group. “Over half of all adults watch video via a connected TV device at least weekly, an increase from one-quarter of adults five years ago, and nearly one-third of adults now use these devices daily."

The top 14 residential broadband providers added 455,000 customers in the second quarter, more than double the 230,000 added in the same period of 2017, according to Leichtman Research Group

Big gainers included Comcast, which added 260,000 high-speed internet users in Q2 compared to just 175,000 last year. Overall, the top seven cable operators added 585,726 users in the second quarter up from 461,997 in the three-month period ending June 30, 2017.

Related: Pay TV Subscriber Losses Dropped to About 415,000 in Q2 as vMVPDs Continue to Grow

The top seven telco operators nearly halved their losses, with their ranks reducing by 130,453 compared to 233,260 in the comparable year-ago Q2. Frontier Communications, which lost 101,000 HSI users in the second quarter last year, lost only 32,000 in the most recent quarter.

“The broadband industry added nearly twice as many subscribers in 2Q 2018 as in last year’s second quarter,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “This quarter marked the first year-to-year quarterly broadband increase since 2Q 2016.”

Overall, it was the first time top ISPs grew subscribers year over since the second quarter of last year.

Collectively, the top 14 ISPs control 95% of the U.S. residential HSI market. And the top seven cable companies now control 64.7% of that market.

The positive subscriber numbers will undoubtedly help the cable industry on Wall Street, with investors having become skittish regarding the prospects of HSI market saturation. 

A pivot to unlimited data plans by all of the nation’s largest cellular service providers is muddling the wireless plans being developed by Comcast and other U.S. MSOs.

AT&T and Verizon Communications, which recently joined Sprint and T-Mobile in offering unlimited mobile data plans, are undermining strategies that some cable operators were pursuing as they look to stitch their ever-expanding WiFi networks to mobile virtual network operator (MVNO) agreements.

Cable operators can put together unlimited plans of their own that use a WiFi-first stance that offloads traffic on metro and in-home WiFi networks and falls back on cellular connections.

“They’re scrambling internally” as other carriers launch and emphasize unlimited mobile plans of their own, an industry source with knowledge about those strategies said.

“The industry’s rush to unlimited certainly complicates things,” Craig Moffett, senior research analyst at MoffettNathanson, said in an emailed statement. “The cable operators will now have no choice but to make their own wireless plans unlimited as well. That’s a problem. Their revenues will be capped. Their costs will not.”

Still absent from the discussion are precise details about how cable operators intend to enter the wireless market, including how those offerings will be priced and packaged and how they will fit into their broader service offerings.

Comcast, which has created a mobile division and intends to launch a mobile offering of its own by midyear, has shed some light on its service, which will take advantage of the company’s MVNO deal with Verizon.

Speaking at an investor conference in late February, Comcast chairman and CEO Brian Roberts said company watchers can expect Comcast’s product to be profitible, but it will launch as part of a bundle.

“The product itself is going to save you money by taking our bundle,” Roberts said, and the wireless product will also help Comcast sell other products in its arsenal.

Last week, FierceWireless reported that the popular iPhone will factor into a service that will carry the Xfinity Mobile brand.

Charter Communications is also looking to take advantage of an MVNO deal it inherited from its merger with Time Warner Cable and Bright House Networks, but hasn’t revealed its go-to-market strategy.

Another person familiar with Comcast’s mobile ambitions said it would be incorrect to think that Comcast’s plan is to take the major mobile carriers head on. Amplifying Roberts’s point, the source said Comcast views the wireless business as additive, a way to enhance and build on its existing product portfolio. “That’s an important nuance,” the source said.

Another industry analyst believes that the surge of unlimited offerings from incumbent mobile giants won’t have a big impact on cable’s efforts to re-enter the market, despite past stumbles like the short-lived “Pivot” joint venture with Sprint.

“It’s another form of bundling,” Bruce Leichtman, president and principal analyst of Leichtman Research Group, said. “It doesn’t have to be differentiated from other wireless services. The differentiator, potentially, is the ability to bundle. That’s where the value lies, not in the mobile service itself.”

Plus, the latest unlimited craze is not occurring to counter what cable operators have in store, according to Jefferson Wang, senior partner, wireless, at IBB Consulting, a firm that works with a range of mobile and cable providers.

It all ties into competition among those carriers, which have no choice but to match up because the market is already saturated.

“A lot of that innovation is coming from the pricing and packaging side, which means unlimited becomes a very enticing offer to consumers,” Wang said.

He also said not to expect uniformity on how MSOs enter the market or how the move to unlimited models will affect them. How those operators jump in and the goals they set will be determined by whether they have a favorable MVNO agreement and what kind of other network assets they already have at their disposal, including fiber and WiFi infrastructure.

“To get into a consumer smartphone/wireless play is a very narrow definition of a very broad opportunity,” Wang said. “I view it more as a launching point.”

Cable operators have a lot of fiber in their networks, but it’s clear that their advantage in WiFi networking assets will be played aggressively.

Comcast, for example, has about 16 million WiFi hotspots deployed in metro and business locations and inside home gateways. At last check, the Cable WiFi roaming consortium, a group that includes Comcast, Cox Communications, Altice and Charter, has deployed about 500,000 hotspots that their respective customers can use.

The amount of data being offloaded on WiFi networks is expected to surge in the next few years.

As of 2016, 63% of all traffic from mobile-connected devices was being offloaded to fixed networks by means of WiFi devices and femtocells each month, according to Cisco Systems’s latest Visual Network Index: Global Mobile Data Traffic Forecast. The same report expects that half of IP traffic — fixed and mobile — will be WiFi by 2021, versus 30% on wired networks and 20% via mobile/cellular.

Wang of IBB Consulting said cable operators must be agile and be ready to make changes quickly in the hypercompetitive and ever-evolving mobile market.

“When you create an entry strategy, things can change,” he said. “You have to make sure you really think through your strategy, but make sure it’s flexible.”

Related > Viewer Watch 2017: Download the Complete Report

Though TV has long been a numbers game, hard data showing changes in the way consumers access video remains a hotly debated subject.

It’s not just that there’s considerable disagreement over how to interpret these changes among executives overseeing what Magna calls the $67 billion TV ad market and PwC describes as the $101 billion subscription pay TV business. There is also much grumbling over the kind of data that is available to answer these multibillion-dollar questions.

“I don’t think we’ve made as much progress as we should have made” in measuring the consumption of video on all platforms and devices, Turner Broadcasting System chief research officer Howard Shimmel said.

There also isn’t much agreement on how the growth in multiplatform video consumption will affect pay TV subscriptions. Some contend that the rise of over-the-top streaming options will sharply reduce the pay TV subscriber ranks; others believe the issue is much more complex.

“From its peak in the first quarter of 2012, the major providers have lost about 1.8 million subscribers,” Bruce Leichtman, president and principal analyst at Leichtman Research Group, said. “The industry is clearly saturated and in a slow decline.”

Interpreting those numbers remains controversial, in part because data on the size of the pay TV universe rests on different assumptions. Leichtman, for example, includes data from services like Sling TV in his company’s estimates, while SNL Kagan does not.

Nielsen also provides different numbers. It reports the number of homes that have TVs connected to a pay TV service, which is different than the number of total pay TV subscribers reported by operators, Nielsen executive vice president of research Glenn Enoch said.

“You have to be very careful about the numbers you use and [about] drawing a straight line from those numbers to revenue, because things are much more complicated than that,” he said.

Related > New Normal: Digital Distribution

CORD-CUTTING CALCULUS

A number of researchers agreed. The proportion of “people dropping pay TV subscriptions is now about 2.6%,” Leichtman noted, which is about the same rate as 10 years ago, when the industry was growing.

“The problem is that the number of new customers has declined,” Leichtman said. “We only see 1% [of homes] moving into pay TV. That is down from 3.5% a decade ago and it has had a real impact on the dynamics of the pay TV industry.”

The declines have been smaller than some had expected, SNL Kagan research director Ian Olgeirson noted. “We are seeing a slight acceleration in the decline in subscribers for multichannel services from a roughly 1% decline in 2015 to a decline of what will probably be 1.3% or 1.4% in 2016,” he said.

The causes of those declines are also hotly debated. “Service providers would say that a lot of those declines are driven by price” and economics, Olgeirson said. But that isn’t the whole story, as the economy has rebounded and housing starts have grown over the past two years, he said.

A recent Frank N. Magid Assoicates survey found that 75% of likely cord-cutters said the ability to watch content via the Internet and OTT platforms was a key reason to drop pay TV service, Magid Advisors president Mike Vorhaus said. Only 29% of respondents cited costs.

Research also challenges the prevailing assumption that pay TV and SVOD services are competing offerings, said Howard Horowitz, president and founder of Horowitz Research, who sees them as complementary to traditional pay TV.

Horowitz survey data shows that 52% of whites and 58% of Hispanics have both a multichannel subscription and a subscription VOD service, while only 5% of whites and 6% of Hispanics have just a SVOD service.

STAGNANT AD SPENDING

Much unease also surrounds the ad market. Brian Wieser, senior research analyst, advertising at Pivotal Research Group, said the economy faces considerable uncertainty over the next year.

“I don’t think anyone can say with any certainty what is going to happen next and that uncertainty is going to curtail advertising,” he said.

National TV ad revenue will drop slightly by 0.4% in 2017 to $44.6 billion, Wieser predicted, and remain essentially flat through 2020, when it will hit $45.2 billion.

Magna’s Letang also sees a weak TV ad market combined with bullish prospects for digital media. “In 2017, we see high single digital inflation [in pricing] but high single-digit declines in ratings,” Letang said. “National TV will be up 1% in 2017 from 2016 if you exclude P&O” — meaning the 2016 revenue from political ads and the Summer Olympics — “and down 1% if you include P&O.”

With political and Olympics spending included, Magna projects that total TV spending will drop by 4.8% to $64.2 billion in 2017, declining further to about $62.2 billion in 2021.

Digital spending, though, will continue to grow rapidly. By 2020, Magna forecasts that mobile advertising will more than double to $78.4 billion (38.2% of all advertising) and social media will hit $31.8 billion in 2020 (a 15.5% share). TV, meanwhile, will slip to a 32.4% share.

Given the uncertainty over the ad market and pay TV subscriptions, programmers and operators have been rethinking their operations.

NEED TO BE NIMBLE

The drive to adapt to new consumer habits has prompted a number of projects to make operations more nimble, Discovery Communications chief technology officer John Honeycutt said.

For example, Discovery’s recently deployed “On Ramp” project allows about 80% of the content produced by 600 production suppliers to be uploaded to the Amazon cloud, where it can be immediately available to Discovery employees and channels all around the world.

“Going from 0% to 80% makes us so much more flexible and efficient,” Honeycutt said.

Equally dramatic upgrades are occurring in the pay TV infrastructure. After ticking off a long list of new products and initiatives to deliver more content to more devices, Comcast Cable executive vice president, general manager, video and entertainment services Matthew Strauss noted that these efforts are built on major improvements to the MSO’s infrastructure.

“We are rolling out DOCSIS 3.1,” he said. “We are rolling out Gigabit speeds. We are transitioning more and more to all-IP, which will allow us to innovate and deliver more of these newer services.”

Rapid innovation has also become the norm for digital platforms. “In 2016, we launched 30 new products and made hundreds of enhancements on dozens of platforms,” Alex Wellen, senior vice president and chief product officer at CNN, said.

Much remains to be done, particularly in the area of measurement. This year will mark a notable improvement on that front, with Nielsen planning to begin syndicating its Total Content Ratings on March 1.

“But some of the networks have been saying they won’t be ready for Nielsen’s public rollout in March, and it isn’t clear if everything will be ready in time for the upfronts,” Jane Clarke, CEO and managing director of the Coalition for Innovative Media Measurement (CIMM), said. “It is a very complex process to get it implemented in the apps for every kind of player and all the devices.”

Others worry about the TV industry’s ability to maintain its share of ad spending without better data. “Measuring crossplatform video consumption is important, but it is a 2006 problem,” Turner’s Shimmel said. “Today, when we talk to advertisers, what they really care about is outcomes [such as sales] and I don’t see that kind of measurement anywhere in Nielsen or comScore’s future.”

More debates surround commonly held perceptions of the OTT market.

Michael Leszega, senior analyst of market intelligence at Magna, said that “in 2016, we have [more than] 25 million cord-cutters and cord-nevers,” and that this group will continue to grow. By 2020, he predicted, about 28.6% of all households will be outside the traditional pay TV ecosystem. “It is a sizable portion of the population that can’t be ignored,” he said.

That has prompted a number of companies to develop streaming bundles of channels like Dish Network’s Sling TV, Hulu, Sony’s PlayStation Vue and AT&T’s DirecTV Now.

“If you look at the rumors about Amazon or YouTube coming out with OTT bundles, there could be a whole bunch of them, maybe seven or eight by the end of 2017,” Steve Shannon, general manager of content and services at Roku, said.

Tony Goncalves, senior vice president of strategy and business development for AT&T Entertainment Group, described DirecTV Now “as a mobile-first-centric platform” that will deliver the kind of advanced digital features consumers expect from their mobile apps.

“DirecTV Now is pay TV as an app and it opens up a market that has not historically been addressed by pay TV,” he said.

Dish Network also sees great promise in the melding of pay TV packages, OTT delivery and app experiences, Niraj Desai, the company’s vice president of product management, said.

“TV is becoming an app,” he said. “We have been talking about that trend for a while, but 2016 was really the year TV as an app came into its own” with better TV everywhere offerings and the streaming OTT bundles such as Dish’s Sling TV and DirecTV Now.

COMPLEMENTARY PLAYS

Even better, these products open up new markets and are not designed to cannibalize traditional pay TV offerings, he added. “Sling is complementary to DBS,” he said, meaning Dish and DirecTV’s satellite-TV platforms. “Sling over-indexes with urban millennials and DBS resonates with suburban and more rural customers that are more traditional TV watchers.”

Similar views come from programmers that have aggressively targeted consumers without traditional multichannel TV subscriptions.

“We launched HBO Now with the theory that its subscribers were going to look very different from the traditional subscribers,” Bernadette Aulestia, executive vice president of worldwide distribution at HBO, said of the premium programmer’s standalone app.

HBO Now subscribers are 10 years younger than customers of HBO’s premium cable network and typically live in broadband-only households, she said.

“We look at it as an entry point to customers that are coming into the category,” Aulestia said.

The growing popularity of skinny bundles and streaming OTT offerings has also helped HBO’s premium pay TV business, she added.

“There was a time, as a premium service, that we were only sold at the top of the bundle,” Aulestia said. “The idea that HBO should be sold at every level of the bundle, and even as a standalone service, means there are fewer barriers to get HBO.”

The rise of OTT and skinny bundles has been more worrying for ad-supported networks.

“Getting more creative packaging of content to create more customized solutions for the consumer can be very challenging for content providers because you have increasingly fragmented audiences,” Joe Atkinson, technology, infocomm, entertainment and media advisory leader at consultancy PwC, said.

Atkinson and others said OTT distribution can also open up a number of new opportunities.

For instance, the growing SVOD market encouraged Turner’s recent launch of an OTT movie service called FilmStruck, Coleman Breland, president of Turner Content Distribution and president of TCM, said.

“As the bundle became tighter, we decided to go direct to consumer instead of trying to launch a linear network and push it through the ecosystem,” which would be difficult in the current pay TV environment, he said.

Turner has also been pushing to expand the content made available on all platforms both in terms of reach and quantity, with the addition of offerings like full seasons on-demand.

“We now have 450 affiliate partners for our TV everywhere products” and have seen usage jump by “triple digits” in the last year, Breland said.

TIME TO TARGET

Many of these newer products can be traced to a more fundamental change in the way operators think about their customers.

“Today, service providers have to figure out how to target different individuals in household,” PwC’s Atkinson said. “That is a tough challenge, but I think it is really the keys to the kingdom.”

One example of such a targeting effort is the development of packages targeted to consumers at different life stages. “College students have different needs than a single-family home with kids, and we are very focused on meeting all those different needs,” Comcast’s Strauss said. He said the Xfinity on Campus product has been a success in that regard.

Operators have also been greatly expanding the content sources via apps on Internet connected set-top devices such as Dish Network’s Hopper. “You can watch live TV with your Dish subscription, or recorded TV on your DVR or you can watch Netflix and YouTube all in one convenient place,” Dish’s Desai said.

Adding more choices has also been a top priority for Cox Communications, Steve Necessary, executive vice president of product development and management at the Atlanta-based cable operator, said. “We have more than doubled our VOD offerings from 50,000 to over 120,000,” he said.

Cox also has revamped its TV app to expand the content available on digital devices and speeded up the rollout of Contour — Cox’s version of the Comcast X1 Internet-connected set-top platform — from 3,000 customers to more than 600,000 in 2016.

Very importantly, such efforts are also beginning to pay off. Both Comcast and Cox are seeing some of their best video-subscriber efforts in a decade.

Programmers are also reporting strong gains from their digital platforms.

“There is a blending of content types and expansion of the platforms,” translating into some record-setting numbers, ESPN vice president of digital media research and analytics Dave Coletti said.

In year when some live sports audiences have declined, Coletti noted that Watch ESPN’s live stream of the Nov. 26 college-football game between third-ranked Michigan and second-ranked Ohio State — which went into double overtime before OSU prevailed, 30-27 — tallied 1,273,000 unique viewers, making it ESPN’s most streamed regular college football game. (The game telecast also aired on ABC.)

“Eight of our top 10 most-streamed regular season college football games have occurred this year,” he noted.

The 2016 presidential election helped CNN set a number of network records, Wellen said, including a record audience level on Nov. 9 with 77 million unique users, 83 million video starts, 483 million page views and 29 million live streams.

Equally notable was social media. CNN racked up 169.7 million video views on Facebook and 47.6 million Facebook Live views, he said.

“Those results show that it has become very important to be both a destination for content and a distributed brand,” he said. “We have apps and websites where people can access our content but, we’ve also seen that we can be very successful on Facebook Live” and other outside platforms.

Additional encouraging news can be found in TV use, Nielsen’s Enoch said. “The decreases that we saw in TV usage that really started to accelerate in the mid-2014 have lessened,” he said. “TV consumption remains at near record level.”

“We are also seeing a shift back to the more traditional way of hooking up a TV” to a pay TV service or an antenna, he added. “The universe of homes that can watch TV or can stream video to the big screen has actually grown,” reversing a trend that began with the digital transition and the 2008 recession.

That said, Enoch said the “fastest growing area of overall usage — not just video — is the smartphone.”

In the second quarter of 2016, Nielsen reports that consumers ages 18-34 spent almost as much time each week with their smartphones (14 hours and 36 minutes) and tablets (three hours and 27 minutes) as they did with traditional TV (18 hours and 27 minutes).

Less discussed but equally important are connected TVs. “TVs connected to the Internet by any device have grown from about one-quarter of all households in 2010 to about two-thirds of all households,” Leichtman said. “There are now more connected TV devices in American than there are pay TV set-top boxes.”

Said CBS Interactive president and chief operating officer Marc DeBevoise, “We are seeing explosive usage in those connected TV experiences.” He added that “time spent on connected TVs with our products has grown by more than 300%.”

As an illustration, consumers in October of 2016 spent about 347 minutes per month consuming CBS news content via desktop computers, compared with 360 minutes via Apple TV and 496 minutes via Roku, per unique viewer, DeBevoise noted.

“That is a lot of usage, and we are spending a lot of time making certain we can capitalize on that by getting those experiences right,” he added.

LINES ARE BLURRING

Connected TVs also offer much more advanced capabilities for search and discovery. For example, the Roku platform allows users to search for TV shows and movies across more than 100 apps, Roku general manager of content and services Steve Shannon said.

Advanced features are helping to blur the line between connected devices, pay TV operators and the new bundles of streaming channels.

Companies such as Hulu and Sling are increasingly bundling their subscription packages of channels with a free Roku, Shannon said. Also, Charter, Comcast and a number of other operators have either launched or plan to launch TV everywhere apps on the Roku platform so that subscribers can access a large bouquet of channels on the pay TV apps, he said.

“You have the normalization of OTT, where you are seeing massive amounts of traditional broadcast style content viewing on OTT platforms,” Shannon said.

Pay TV subscribers were leaving the ranks in the third quarter at about the same rate they did last year, but some analysts are bracing for the impact that new over-the-top offerings from DirecTV and Hulu might have on overall cord-cutting.

The pay TV industry lost about 486,000 subscribers in the third quarter, similar to the 436,000 net loss in the same period last year, according to MoffettNathanson principal and senior media analyst Craig Moffett. But if you add over-the-top provider Sling TV to the mix, the losses add up to 282,000 versus 277,000 last year.

Improvement in the cable sector, which lost 124,000 customers in the period vs. 218,000 in Q3 2015, wasn’t enough to offset continued heavy losses in the telco TV sector — down 365,000 subs in the quarter compared with 41,000 subs lost in Q3 2015 — and sluggish growth in satellite TV.

Leichtman Research Group president and principal analyst Bruce Leichtman estimated that pay TV lost about 255,000 subscribers in Q3, slightly higher than the 210,000 losses he estimated in the prior year.

“While the narrative is, ‘This market is falling apart,’ that’s not the reality,” Leichtman said. “What we’re really seeing is a market, which we have been seeing for the past four years, that is saturated and in slow decline.”

A WINTER OF DISCONTENT

But Moffett warned that while the seasonally weak summer months were stable, winter may be coming for the industry. AT&T’s DirecTV Now, the aggressively priced ($35 per month) 100-channel OTT service, is scheduled to launch later this month, and Hulu is expected to release its live-streaming service in the first quarter of 2017.

Moffett said pricing will be key. If DirecTV Now follows through with a $35 price point that is more than just an introductory base price — and Moffett is skeptical — the service could truly be the “game-changer” its management has spoken often about.

“AT&T is taking its content partners for a dance on the edge of a cliff,” Moffett wrote. “It is next quarter, and the quarter after, that will matter. The music has barely begun to play.”

In the meantime, traditional strong points for the pay TV sector continue to be pressured, with satellite and telco TV video losses mounting (see chart).

Dish Network continued to lose net new subscribers by the bucketful in the third quarter; it was down an estimated 320,000 subscribers, not including gains at Dish-owned Sling TV, according to Moffett. Including Sling TV gains of about 204,000 customers, Dish lost 116,000 net subscribers in the period.

At DirecTV, strong gains — 323,000 net additions — in Q3 couldn’t offset heavy losses at parent AT&T’s U-verse TV service. U-verse TV shed 329,000 video customers in Q3, three times the 92,000 subscribers it lost in the prior year, as it transitions customers to DirecTV’s satellite platform. Verizon Fios managed to add about 36,000 video customers in the period, even with last year’s 41,000 additions.

Leichtman saw the share shift between telco and satellite as more of a business decision than a change in consumer preference. He noted that the telco sector added 1.6 million video subscribers in 2014 and lost 1.4 million video customers in the past year. Of those 1.4 million losses, 1.33 million were from AT&T.

“What we’re seeing is a share shift driven by a decision that AT&T has made, not by consumers moving away from telco TV,” Leichtman said.

CABLE’S BROADBAND EDGE

Broadband has apparently been the difference for the cable companies as cable’s high-speed Internet customer growth has far outpaced the telcos’ for decades.

Leichtman estimated that broadband added about 3 million customers in the past year, and said cable accounted for more than 115% of that growth.

“Cable added nearly 3.5 million broadband subscribers, and the telcos are losing,” Leichtman said. “The bundle is as important as it has ever been.”

BTIG media analyst Rich Greenfield estimated that pay TV subscribers from all sources are declining at a 0.9% rate year-to-date and the rate is likely worse among the privately held MVPDs. In a blog post, Greenfield wrote that he is more concerned about cord-shavers — subscribers who are opting for skinny bundles — than those who are severing the relationship altogether.

Cord shaving raised some stubble in late October, after Nielsen estimated that ESPN lost 621,000 subscribers in one month, double the normal rate. Disney has disputed the figures — Nielsen stands by them, and they show increased losses at other networks — but affiliate fees declined in Q3 in part because of a declining base.

Disney chairman and CEO Bob Iger said he was bullish on ESPN’s future, adding that the main reason for the subscriber losses — migration to smaller packages — is easing. He also was encouraged by new deals with digital and over-the-top providers.

But it is just those digital and OTT providers that Greenfield is most worried about.

Greenfield pointed to the new virtual MVPDS, most concerned with the absence of friction in the subscription process. Customers can sign up and drop the service at any time with a click of a mouse, without having to return equipment or pay early termination fees.

“While this clearly may lead to new subs entering the ecosystem,” Greenfield wrote, “we are far more worried about the aforementioned 88 million video subscribers shifting to platforms where they no longer need to pay for an entire year of service to access the content they are most interested in.”

SIDEBAR: Birds and Wires

AT&T’s continued migration of U-verse TV customers over to DirecTV dominated Q3 telco TV losses, while cable managed to reduce subscriber declines in the period.

      Q3 2015                     Q3 2016

Total Cable Adds . . . . . . . . . . . . . (218) . . . . . . . . . . . . . . (124)

Satellite TV Adds . . . . . . . . . . . . (152) . . . . . . . . . . . . . . . . 3

Telco TV Adds . . . . . . . . . . . . . . .  (41) . . . . . . . . . . . . . . . (365)

Sling TV Adds . . . . . . . . . . . . . . . . 155 . . . . . . . . . . . . . . .  204

Total Net Adds . . . . . . . . . . . . . . (277) . . . . . . . . . . . . . . (282)

Source: MoffettNathanson estimates; figures in 000s; numbers in parentheses represent declines.